Crypto markets were driven largely by sentiment in May, resulting in sharp gains during the start of the month and a robust decline over the coming weeks.
While many top cryptos followed a similar pattern of rallying and then suffering significant losses, these digital assets were in several cases impacted by their own unique variables, which for example include the May 15 hard fork of Bitcoin Cash and the anticipation surrounding the release of the EOS mainnet.
The overall cryptocurrency market climbed 12.7 percent between May 1 and 6, before falling 31 percent during the rest of the month, according to the MVIS CryptoCompare Digital Assets 100 Index (MVDA), a key benchmark based on the value of the top 100 largest digital assets.
After having a strong April, digital currencies enjoyed contained gains, pushing higher as strong sentiment drove the market’s activity. However, the market peaked at around May 6, and several cryptocurrencies started posting significant losses after this time frame.
In a nutshell, the entire cryptocurrency ecosystem has been “moving in one direction for the past few months,” as cryptocurrency trader Marius Rupsys put it. May’s early days were merely a continuation of April’s “bounce up, which faded quite soon.”
Iqbal Gandham, eToro’s UK Managing Director, offered a similar point of view, stating that:
“The May trend started way back in April, if you have a look at the charts. It peaked around the first week of May. It seemed to be aligned with the overall yearly chart, forming a wedge pattern.”
While many various top cryptocurrencies followed each other during the month, their paths were not all the same.
Bitcoin, for example, rose modestly during the start of the month, climbing 10.8 percent between May 1 and May 6 from $8,958.94 to $9,928.39, CryptoCompare data reveals. The world’s biggest cryptocurrency by market capitalization then proceeded to suffer moderate losses, finishing the month at $7,502.45, down 16.3 percent from the start of May and 24.4 percent from its monthly high.
Analysts cited a handful of developments as potentially pushing bitcoin higher this month. Goldman Sachs, for example, revealed plans to create a BTC trading desk, as reported by CryptoGlobe.
Just a few days later, it was reported that Intercontinental Exchange Inc., which owns and operates the New York Stock Exchange, has been developing a platform that will allow market participants to place bets on bitcoin.
Gandham emphasized the positive impact of such developments, stating that “with Goldman and other institutions (Nomura) making positive noises and institutional money waiting for clarity prior to moving in, the news is starting to look good.”
Ether, the second-largest digital currency by market capitalization, experienced a more robust gain during the start of the month, rising 28.6 percent between May 1 and 5, according to CryptoCompare figures. During this time, the cryptocurrency climbed from $640.64 to $823.78.
By the end of the month, ether plunged to $572.51, having fallen more than 30 percent from its monthly high. Several analysts spoke of regulatory concerns, emphasizing that recent developments pressured this particular altcoin.
Coin IRA CEO Trevor Gerszt noted that “recent efforts by the SEC, CFTC, and state regulators with regard to ICOs have Ethereum investors nervous, as Ethereum could still end up being regulated as a security.”
Jeff Koyen, president of 360 Blockchain USA, also weighed in on the situation.
“For several weeks — and until recently — ETH was facing downward pressure over regulatory fears,” he stated.
“There were quite a few shots over the bow, so to speak, that suggested tokens would be the SEC's first clampdown targets. That may still happen. The SEC and other U.S. agencies haven't said very much lately about their plans to categorize and regulate crypto. But imminent threats to tokens have quieted, leading to Ether's rebound.”
Bitcoin Cash had a volatile May, surging more than 37 percent from $1,293.17 to $1,779.58 between May 1 and 6, before plunging more than 40 percent to $993.87 over the next three weeks.
The cryptocurrency’s price was credited with receiving tailwinds from a May 15 hard fork, which increased its block size from 8 to 32 MB, while adding several technical upgrades.
Further, it was announced later on that Bitcoin Cash miners held a meeting where they discussed a proposal to give developers a portion of their mining rewards, in order to spur the network’s growth.
EOS, a cryptocurrency linked to an innovative platform for developing decentralized applications (Dapps), saw a brief rally early in the month, climbing nearly 15 percent from $16.99 to $19.51 between May 1 and 2, before experience a sharp decline. By the end of the month, it had fallen nearly 40 percent to $12.22.
Technologists, developers and market observers have been looking forward to the launch of EOS’s mainnet, which is set to take place on June 2.
Mati Greenspan, a senior market analyst at eToro, stated:
“The launch of the mainnet is a really big deal. Nobody really knows exactly what's going to happen but it's definitely gonna be big.”
IOTA, a cryptocurrency that powers a blockless distributed ledger called Tangle, spiked early in May, climbing more than 40 percent from $1.84 to $2.59 between May 1 and 3.
This sharp climb coincided with numerous positive developments, including an announcement that the IOTA Ecosystem went live. The digital currency experienced a downward trend from there, before enjoying a brief rally near the end of the month as IOTA benefited from the beta release of its Trinity Mobile wallet.
By the end of May, IOTA was trading at $1.74, down more than 30 percent from its intra-month high.
Crypto Market’s Next Steps
While the cryptocurrency ecosystem can be highly unpredictable, a handful of analysts gave their two cents on how these cryptocurrencies will behave going forward. In the near-term, these will continue to fluctuate based on changes in sentiment, said Gerszt. He added:
“Positive news about light future regulation and new businesses entering Bitcoin and Ethereum trading will push prices upward, while regulatory investigations and allegations of fraud will push prices down.”
Rupsys also emphasized the key role played by regulatory uncertainty, stating that the market needs to “get some clarity on the regulation side,” at which point “we might see more positive moves.”